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Platinum Group targets 'build or sell' decision by year-end

TORONTO (miningweekly.com) – TSX- and Amex-listed Platinum Group Metals (PTM) hopes to have a decision this year on whether it will look for a buyer or build its first platinum mine in South Africa, president Michael Jones said on Thursday.

“We think there are a number of different opportunities and we'd like to make a decision and get on with it,” he said in an interview from Vancouver.

“But we are going to move carefully and very strategically.”

PTM controls projects 1 and 3 of the Western Bushveld Joint Venture (WBJV), which also included number-one producer Anglo Platinum (Angloplat) and Wesizwe Platinum.

The companies have restructured the JV, with Angloplat exiting the partnership, and PTM taking a 74% interest in projects 1 and 3. JSE-listed Wesizwe holds the other 26%, plus 100% of project 2.

Last month, PTM completed an updated feasibility study for the large Project 1, boosting annual production forecasts to 275 000 oz/y and trimming the capital requirement to $443-million on a 100% basis.

With an exceptionally high-grade (7 g/t resource head grade) and shallow resource, at a time when South Africa's platinum miners are dealing with power concerns, ongoing safety setbacks and chasing orebodies deeper into the ground, Jones is in a strong position and is playing his cards close to his chest.

Starting with a potential sale, a buyer could be interested in the full company, just the South African firm or only come in at the asset level, and PTM has not ruled anything out, Jones said.

“We are looking at things in a very pragmatic way, and whichever way it goes, we are going to look for the best return for our PTM shareholders.”

He declined to comment on whether the company has been in talks with potential buyers or signed any confidentiality agreements.

In September, RBC Capital Markets analyst Leon Esterhuizen said he expected PTM may become a takeover target.

The company's Project 1 was one of the best projects available in sector, he said at the time.

FOR SALE?

At the other end of the spectrum, of course, PTM could opt to fund and build the mine itself.

Although the company is still waiting for a final mining right from South Africa's Department of Mineral Resources, it has received all the necessary permits to start underground development and most of the surface rights have been purchased.

The schedule in the feasibility study calls from construction to begin early next year, and that is something the company is still pushing towards.

PTM has also been hard at work over the last year to bring banks to the table, and has had five different banks complete technical due diligence on the project, corporate development head Kris Begic said at a conference in New York on Wednesday.

If it decides to fund the mine with a traditional debt-equity combination, there are two indicative term sheets already on the table to fund the debt portion, he said.

Jones also commented that the financing could potentially be tackled in a series of steps, instead of raising the full capital cost upfront.

The shallow nature of the deposit means that it does not run the risk of building “a bridge halfway to nowhere” if it chooses to raise the capital in this way.

“Because it's shallow, we could access the ore, so at any of those financing steps, we would still have quite a viable project.”UNCONVENTIONAL

Finally, Jones' third category – 'hedge it' – would involve a less conventional approach to financing the mine.

There are parties that are interested in the metal, either as an end-user or in a purely financial transaction, and the company is actively investigating options along these lines.

“If you look at something like 10% or 20% of our metal flow at a fixed price, that is a very valuable thing.

“And we think that the financial market on platinum may also have a better appreciation than the public market on shares,” Jones said.

PTM is also working on a scoping study for its Project 3 of the WBJV and, based on internal numbers, believes it could move the project quite quickly to production.

“The big question is capital, of course. And job one is to get project 1 moving,” Jones added.

PTM shares slid 3,3% on Thursday, to C$1,77 apiece by 13:36 in Toronto.

Earlier this week, billionaire investor George Soros' Soros Fund Management disclosed that it has acquired a position in PTM. The fund held 100 000 shares in the third quarter.